Brisconnections to resort to discounts

Brisconnections
, the operator of Brisbane’s Airport Link road, is planning to offer discounts to encourage drivers to use the beleaguered tollroad after confirming it will open nearly two months late.

Airport Link, which is being built by Leighton contractors Thiess and John Holland, is now due to open by August 20 instead of the scheduled finish date of June 30.

The delay is expected to cost Leighton tens of millions of dollars in penalty fees. Both Leighton and Brisconnections declined to comment on the final cost of the penalties, which are estimated at more than $1 million a day.

Leighton, which will report first-quarter results today, said it had already made “adequate commercial allowances" to cover the delay and that it would have no further impact on its 2012 profit guidance. Leighton has written down Airport Link by more than $1 billion since late 2010 after underestimating the complexity of building the $4.1 billion project.

It was forced to cut its 2012 net profit forecast to $400 million to $450 million from $600 million to $650 million in March after taking another round of writedowns on Airport Link and its Victorian desalination project.

At the time, Leighton said it was “targeting" completion of Airport Link by June 30, but set aside an undisclosed sum of money for penalty fees.

Leighton’s shares fell heavily yesterday, down 3.5 per cent to $19.25, leaving the stock at the lowest level since the start of the year. But analysts said the drop was mostly due to investor concerns about the company’s exposure to the resources sector as the broader market fell 2.1 per cent.

Brisconnections’ chief executive, Ray Wilson, said the group was considering extensions to a planned one-month toll-free period for Airport Link as well as other incentives to encourage drivers to use it when it opens. “We are looking at some other products that would make it better value for money in the long term," he said.

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The maximum price Brisconnections can charge for cars to use Airport Link is $3.67 for short journeys and $3.90 for long journeys.

Brisconnections is keen to avoid the fate of another Brisbane tollroad group, RiverCity Motorways, which collapsed last year after forecast traffic through its Clem Jones tunnel was sharply below expectations despite an extended period of discounted fees.

Airport Link’s late opening is likely to postpone the sale of RiverCity Motorways’ Clem Jones tunnel, which connects with the road, into early next year.

Buyers will want to see how Airport Link performs before bidding for RiverCity.

Mr Wilson said he was “cautiously confident" Airport Link would meet the new deadline for a full opening. “I would expect we would be opening the entire road at one time," he said.